Catskill Mts. Chptr. of Trout Unlimited, Inc. v. United States EPA - 846 F.3d 492 (2d Cir. 2017)

Rule:

The question for a reviewing court at Chevron Step Two is whether the agency's answer to the interpretive question is based on a permissible construction of the statute. A court will not disturb an agency rule at Chevron Step Two unless it is arbitrary or capricious in substance, or manifestly contrary to the statute. Generally, an agency interpretation is not arbitrary, capricious, or manifestly contrary to the statute if it is reasonable. The agency's view need not be the only possible interpretation, nor even the interpretation deemed most reasonable by the courts. This approach is premised on the theory that a statute's ambiguity constitutes an implicit delegation from Congress to the agency to fill in the statutory gaps. When interpreting ambiguous statutory language involves difficult policy choices, deference is especially appropriate because agencies are better equipped to make these choices than courts. Even under this deferential standard, however, agencies must operate within the bounds of reasonable interpretation, and a court therefore will not defer to an agency interpretation if it is not supported by a reasoned explanation. An agency interpretation would be arbitrary or capricious if it were picked out of a hat, or arrived at with no explanation, even if it might otherwise be deemed reasonable on some unstated ground.

Facts:

The United States Environmental Protection Agency (the “EPA”) in 2008 adopted a final rule entitled “National Pollutant Discharge Elimination System (NPDES) Water Transfers Rule” (the “Water Transfers Rule”). The Rule states that water transfers "do not require NPDES permits because they do not result in the 'addition' of a pollutant." No NPDES permit is required if "the water being conveyed [is] a water of the U.S. prior to being discharged to the receiving waterbody" and the water is transferred "from one water of the U.S. to another water of the U.S.". Thus, even if a water transfer conveys waters in which pollutants are present, it does not result in an "addition" to "the waters of the United States," because the pollutant is already present in "the waters of the United States." Shortly thereafter, the plaintiffs, a consortium of environmental conservation and sporting organizations and several state, provincial, and tribal governments, challenged the Water Transfers Rule by bringing suit in the United States District Court for the Southern District of New York against the Agency and its Administrator. After a variety of persons and entities on both sides of the issue intervened, the district court (Kenneth M. Karas, Judge) granted summary judgment for the plaintiffs on the ground that the Water Transfers Rule, although entitled to deferential review under the two-step framework established by Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984), could not survive judicial scrutiny because it was based on an unreasonable interpretation of the Clean Water Act. The district court accordingly vacated the Water Transfers Rule and remanded it to the Agency for further assessment. 

Issue:

Is the Water Transfers Rule based on a reasonable interpretation of the Clean Water Act?

Answer:

Yes.

Conclusion:

The EPA provided a reasoned explanation for its decision in the Water Transfers Rule to interpret the Clean Water Act as not requiring NPDES permits for water transfers. It was evident from the EPA's rationale how and why it arrived at the interpretation of the Clean Water Act set forth in the Water Transfers Rule. It was clear that the EPA based the Rule on a holistic interpretation of the Clean Water Act that took into account the statutory language, the broader statutory scheme, the statute's legislative history, the EPA's longstanding position that water transfers are not subject to NPDES permitting, congressional concerns that the statute not unnecessarily burden water quantity management activities, and the importance of water transfers to U.S. infrastructure. In the Water Transfers Rule, the EPA analyzed the text of the statute, explaining how its interpretation was justified by its understanding of the phrase "the waters of the United States," as well as by the broader statutory scheme, noting that the Clean Water Act provides for several programs and regulatory initiatives other than the NPDES permitting program that could be used to mitigate pollution caused by water transfers. The EPA also justified the Rule by reference to statutory purpose, noting its view that "Congress intended to leave primary oversight of water transfers to state authorities in cooperation with Federal authorities," and that Congress intended to create a "balance . . . between federal and State oversight of activities affecting the nation's waters." The EPA also stated that subjecting water transfers to NPDES permitting could affect states' ability to effectively allocate water and water rights, and explained how its interpretation was justified in light of the Act's legislative history. The EPA concluded by addressing several public comments on the Rule, and explaining in a reasoned manner why it rejected proposed alternative readings of the Clean Water Act. This rationale, while not immune to criticism or counterargument, was sufficiently reasoned to clear Chevron's rather minimal requirement that the agency give a reasoned explanation for its interpretation. We see nothing illogical in the EPA's rationale. The agency provided a sufficiently reasoned explanation for its interpretation of the Clean Water Act in the Water Transfers Rule. The Rule's interpretation of the Clean Water Act was therefore not adopted in an "arbitrary" or "capricious" manner. 

The Water Transfers Rule also reasonably interpreted the Clean Water Act. The EPA's interpretation of the Clean Water Act as reflected in the Rule was supported by several valid arguments—interpretive, theoretical, and practical. The permissibility of the Rule was reinforced by longstanding practice and acquiescence by Congress, recent case law, practical concerns regarding compliance costs, and the existence of alternative means for regulating pollution resulting from water transfers. First, in the nearly forty years since the passage of the Clean Water Act, water transfers have never been subject to a general NPDES permitting requirement. Congress thus appears to have, however silently, acquiesced in this state of affairs. This may well reflect an intent not to require NPDES permitting to be imposed in every situation in which it might be required, including as a means for regulating water transfers. This in turn suggests that the EPA's unitary-waters interpretation of Section 402 of the Act in the Water Transfers Rule is reasonable. Another factor favoring the reasonableness of the Water Transfers Rule's interpretation of the Clean Water Act is that compliance with an NPDES permitting scheme for water transfers is likely to be burdensome and costly for permittees, and may disrupt existing water transfer systems. For instance, several intervenor-defendant water districts assert that it could cost an estimated $4.2 billion to treat just the most significant water transfers in the Western United States, and that obtaining an NPDES permit and complying with its conditions could cost a single water provider hundreds of millions of dollars. See Water Districts Br. 21. Similarly, intervenor-defendant New York City submits that if it is not granted the permanent variances it has requested in its most recent permit application, it will be forced to construct an expensive water-treatment plant, and amicus curiae the State of California argues that requiring NPDES permits would put a significant financial and logistical strain on the California State Water Project, see State of California Amicus Br. 16. Further, amici curiae the American Farm Bureau Federation and Florida Farm Bureau Federation argue that the invalidation of the Water Transfers Rule would (i) throw the status of agricultural water-flow plans into doubt, and (ii) require state water agencies to increase revenues to pay for permits for levies and dams, which they would likely accomplish by raising agricultural and property taxes, and which in turn would raise farmers' costs and hurt their international economic competitiveness. See Farmer Amici Br. 2-3. The potential for such disruptive results, if accurate, would provide further support for the EPA's decision to interpret the statutory ambiguity at issue so as not to require NPDES permits for water transfers. Yet another consideration supporting the reasonableness of the Water Transfers Rule is that several alternatives could regulate pollution in water transfers even in the absence of an NPDES permitting scheme, including: nonpoint source programs; other federal statutes and regulations; the Federal Energy Regulatory Commission's regulatory scheme for non-federal hydropower dams; state permitting programs that have more stringent requirements than the NPDES program; other state authorities and laws; interstate compacts; and international treaties. The availability of these regulatory alternatives further points towards the reasonableness of the EPA's interpretation of the Act in the Water Transfers Rule. States have still more regulatory tools at their disposal. State agencies may be granted specific authority to address particular pollution or threats of pollution. For example, in New York, the NYSDEC is authorized and directed to promulgate rules to protect the recreational uses—such as trout fishing and canoeing—of waters affected by certain large reservoirs such as the Schoharie Reservoir. And as discussed above, states likely can also bring common-law nuisance suits to enjoin and abate pollution. States and the Federal Government can address any such effects through interstate compacts or treaties, as well as Section 310 of the Clean Water Act, which authorizes an EPA-initiated procedure for abating international pollution. The existence of these available regulatory alternatives suggests that exempting water transfers from the NPDES permitting program would not necessarily defeat the fundamental water-quality aims of the Clean Water Act, which further counsels in favor of the reasonableness of the Water Transfers Rule.